FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended November 30, 1996
Commission File Number 0-1500
EVANS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-1050870
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification Number)
36 South State Street, Chicago, Illinois 60603
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312-855-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: as of January 10,
1997 4,918,301 shares of common stock, $.20 par value, were outstanding.
<PAGE>
EVANS, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information --------
Condensed Consolidated Balance Sheets -
November 30, 1996, November 25, 1995
and March 2, 1996 2
Condensed Consolidated Statements of Operations -
Thirteen and Thirty-nine weeks ended
November 30, 1996 and November 25, 1995 3
Condensed Consolidated Statements of Cash Flows -
Thirty-nine weeks ended November 30, 1996
and November 25, 1995 4
Notes to Condensed Consolidated Financial Statements 5 - 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 9
Part II. Other Information 10
Signatures 11
Index to Exhibits 12
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Evans, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
November 30, November 25, March 2,
1996 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $2,768,000 $1,600,000 $1,378,000
Accounts receivable (net) 14,753,000 18,451,000 15,984,000
Merchandise inventories 31,311,000 27,918,000 14,761,000
Prepaid expenses and other assets 598,000 450,000 1,154,000
Deferred income taxes 2,074,000
------------ ------------ ------------
Total current assets 51,504,000 48,419,000 33,277,000
------------ ------------ ------------
Property and equipment 20,612,000 23,208,000 20,716,000
Accumulated depreciation and
amortization (10,681,000) (12,703,000) (10,293,000)
------------ ------------ ------------
Net property and equipment 9,931,000 10,505,000 10,423,000
Other assets 3,279,000 3,539,000 3,469,000
------------ ------------ ------------
$64,714,000 $62,463,000 $47,169,000
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable $13,588,000 $11,860,000 $9,219,000
Current portion of long-term debt 1,043,000 1,042,000 1,043,000
Accounts payable 22,958,000 22,409,000 7,769,000
Accrued liabilities 6,678,000 8,211,000 5,461,000
------------ ------------ ------------
Total current liabilities 44,267,000 43,522,000 23,492,000
------------ ------------ ------------
Long-term debt 1,486,000 2,180,000 1,888,000
------------ ------------ ------------
Other liabilities 47,000 11,000 11,000
------------ ------------ ------------
Shareholders' equity:
Preferred stock, 3,000,000 shares
authorized, none issued
Common stock, 6,333,433 shares
issued 1,267,000 1,267,000 1,267,000
Capital in excess of par value 15,660,000 15,660,000 15,660,000
Retained earnings 6,585,000 4,421,000 9,449,000
------------ ------------ ------------
23,512,000 21,348,000 26,376,000
------------ ------------ ------------
Treasury stock (1,415,134 shares
at cost) (4,598,000) (4,598,000) (4,598,000)
------------ ------------ ------------
Total shareholders' equity 18,914,000 16,750,000 21,778,000
------------ ------------ ------------
$64,714,000 $62,463,000 $47,169,000
============ ============ ============
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
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<PAGE>
<TABLE>
Evans, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
-------------------------- --------------------------
Nov. 30, Nov. 25, Nov. 30, Nov. 25,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $19,765,000 $23,034,000 $35,358,000 $43,333,000
Service revenues 1,866,000 1,682,000 10,750,000 10,991,000
------------ ------------ ------------ ------------
21,631,000 24,716,000 46,108,000 54,324,000
------------ ------------ ------------ ------------
Costs and expenses:
Cost of goods and
services sold, buying
and occupancy costs 13,677,000 15,377,000 29,874,000 36,333,000
Selling and general
expenses 8,557,000 9,314,000 19,726,000 21,335,000
Provision for doubtful
accounts 158,000 189,000 357,000 439,000
Interest expense 407,000 412,000 1,094,000 1,016,000
Other income, net -- (2,000) (5,000) (5,000)
------------ ------------ ------------ ------------
22,799,000 25,290,000 51,046,000 59,118,000
------------ ------------ ------------ ------------
Loss before credit
for income taxes (1,168,000) (574,000) (4,938,000) (4,794,000)
Credit for income taxes 491,000 -- 2,074,000 --
------------ ------------ ------------ ------------
Net loss ($677,000) ($574,000) ($2,864,000) ($4,794,000)
============ ============ ============ ============
Net loss per common
share ($0.14) ($0.12) ($0.58) ($0.97)
------------ ------------ ------------ ------------
Cash dividends per
common share -- -- -- --
Weighted average number
of common shares
outstanding 4,918,301 4,918,301 4,918,301 4,918,301
============ ============ ============ ============
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
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<PAGE>
<TABLE>
Evans, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Thirty-nine weeks ended
-------------------------------
Nov. 30, 1996 Nov. 25, 1995
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss ($2,864,000) ($4,794,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 1,047,000 1,043,000
Provision for doubtful accounts 357,000 439,000
Change in assets and liabilities:
Accounts receivable 874,000 (1,785,000)
Merchandise inventories (16,550,000) (11,517,000)
Prepaid expenses and other current assets 556,000 62,000
Deferred income taxes (2,074,000) 0
Other assets 28,000 (661,000)
Accounts payable 15,189,000 11,732,000
Accrued liabilities 1,217,000 1,281,000
Other liabilities 36,000 (5,000)
------------ ------------
Net cash used in operating activities (2,184,000) (4,205,000)
Cash Flows from Investing Activities:
Proceeds from the sale of property
and equipment 5,000 10,000
Additions to property and equipment (398,000) (772,000)
------------ ------------
Net cash used in investing activities (393,000) (762,000)
Cash Flows from Financing Activities:
Proceeds from short-term borrowing 4,369,000 4,140,000
Principal payments on long-term debt (402,000) (473,000)
------------ ------------
Net cash provided by financing activities 3,967,000 3,667,000
------------ ------------
Net increase (decrease) in cash
and cash equivalents 1,390,000 (1,300,000)
Cash and cash equivalents at beginning
of period 1,378,000 2,900,000
------------ ------------
Cash and cash equivalents at end of period $2,768,000 $1,600,000
============ ============
Supplemental Disclosures of Cash Flow Information:
- --------------------------------------------------
Cash paid during the period for:
Interest $967,000 $916,000
Income taxes 79,000 32,000
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
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<PAGE>
EVANS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The financial information included herein was prepared in conformity
with generally accepted accounting principles and such principles were
applied on a basis consistent with those reflected in the 1996 Form
10-K Annual Report filed with the Securities and Exchange Commission.
The accompanying financial data should be read in conjunction with
the notes to consolidated financial statements contained in the 1996
Form 10-K Annual Report.
The information furnished herein, other than the Condensed Consolidated
Balance Sheet as of March 2, 1996, is unaudited and includes all adjustments
and accruals consisting only of normal recurring adjustments which
are, in the opinion of management, necessary for a fair statement of
results for the interim periods. The Condensed Consolidated Balance
Sheet as of March 2, 1996 has been derived from, and does not include
all the disclosures contained in the audited financial statements as
of and for the year ended March 2, 1996.
2. Because of the seasonal nature of the Company's business, operating
results for the first thirty-nine weeks are not considered to be indicative
of the results that may be expected for the full year. Historically,
the Company realizes a major portion of its annual revenues and most
of its earnings in the fourth quarter of its fiscal year.
3. Common share equivalents were not included in the computation of
earnings per share for the thirteen and thirty-nine weeks ended November
30, 1996 and November 25, 1995, because the periods resulted in net
losses and the effect would be antidilutive.
4. Certain reclassifications have been made to the Condensed Consolidated
Balance Sheet for March 2, 1996 to conform to the presentation for
November 30, 1996. Such reclassifications did not effect the previously
reported operating results.
5. On November 25, 1996 and January 9, 1997, the Company amended its
revolving credit agreement to reflect its current operating condition.
6. On December 30, 1996, the Company sold its property in Fort Worth,
Texas for $357,000 resulting in a gain of $52,000 which will be recorded
in the fourth quarter of fiscal 1997. The net proceeds generated from
the sale were used to pay down the $350,000 long-term note payable
obligation which was collateralized by the property.
- 5 -
<PAGE>
EVANS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
7. During the third quarter of fiscal 1997, the Company, pursuant to
the Evans, Inc. 1994 Stock Option Program, granted 36,500 options to
55 key employees at the price of $2.25 being 100% of market value on
the date of grant, bringing the total number of options outstanding
as of November 30, 1996 to 431,500.
- 6 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
Cash and cash equivalents at November 30, 1996 were $2,768,000 as compared
to $1,378,000 at March 2, 1996. The increase was due to cash provided
by financing activities of $3,967,000 partially offset by cash used
in operating activities of $2,184,000 and cash used in investing activities
of $393,000.
The cash used in operating activities was due primarily to the net
loss for the first thirty-nine weeks of $2,864,000 and an increase
in merchandise inventories of $16,550,000 related to the buildup of
inventory due to the seasonal nature of the Company's business. These
changes were partially offset by an increase in accounts payable of
$15,189,000 which was directly related to the increase in merchandise
inventories and a decrease in accounts receivable of $874,000 due primarily
to attrition of the Company's proprietary credit card portfolio.
The cash used in investing activities was largely the result of additions
to property and equipment of $398,000 of which approximately 44% is
related to the relocation of the Rosendorf/Evans store within the mall
at Tysons Corner Center in McLean, Virginia.
The cash provided by financing activities was due primarily to an increase
in notes payable of $4,369,000 due to the seasonal nature of the Company's
business, partially offset by principal payments on long-term debt
of $402,000.
Working capital at November 30, 1996 was $7,237,000 as compared to
$9,785,000 at March 2, 1996.
The revolving line of credit which expires May 31, 1998 is considered
adequate to finance seasonal inventory requirements as well as commitments
for capital expenditures during fiscal 1997.
Results of Operations
Total revenues for the third quarter ended November 30, 1996 decreased
$3,085,000 (12.5%) as compared to the same period last year. Fur merchandise
sales decreased $2,070,000 (12.8%) due primarily to a decrease of $1,884,000
(12.4%) in sales at comparable locations and a decrease of $1,019,000
in sales associated with locations closed subsequent to the third quarter
of the prior year, partially offset by $834,000 in sales associated
with store closing events in the Marshall Fields stores in Texas. The
Company believes that fur merchandise sales at comparable locations
have been adversely impacted by the significant increase in fur prices,
primarily mink, as well as the record high consumer debt levels Women's
ready-to-wear sales decreased $1,199,000 (17.5%) due primarily to a
decrease of $852,000 (13.1%) in sales at comparable locations and a
decrease of $347,000 in sales associated with a Company-owned location
closed subsequent to
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations, continued
the third quarter of the prior year. The Company believes that women's
ready-to-wear sales at comparable locations have been adversely impacted
by competition from department and discount stores. Service revenues
increased $184,000 (10.9%) due primarily to an increase of $199,000
(12.3%) in sales at comparable locations partially offset by a decrease
of $16,000 in sales associated with locations closed subsequent to
the third quarter of the prior year.
Total revenues for the first nine months decreased $8,216,000 (15.1%)
as compared to the same period last year. Fur merchandise sales decreased
$3,643,000 (14.9%) due primarily to a $3,034,000 (13.5%) decrease in
sales at comparable locations and a $1,443,000 decrease in sales associated
with locations closed during and subsequent to the first quarter of
the prior year. These decreases were partially offset by $834,000
in sales associated with store closing events in the Marshall Fields
stores in Texas. The Company believes that fur merchandise sales at
comparable locations have been adversely impacted by the significant
increase in fur prices, primarily mink, as well as the record high
consumer debt levels. Women's ready-to-wear sales decreased $4,332,000
(22.9%) due primarily to a $3,319,000 (18.6%) decrease in sales at
comparable locations and a $1,013,000 decrease in sales associated
with two Company-owned locations closed during and subsequent to the
first quarter of the prior year. The Company believes that women's
ready-to-wear sales at comparable locations have been adversely impacted
by competition from department and discount stores. Service revenues
decreased $241,000 (2.2%) due primarily to a $703,000 decrease in sales
associated with locations closed during and subsequent to the first
quarter of the prior year, partially offset by an increase of $462,000
(4.6%) in sales at comparable locations.
Cost of goods and services sold, buying and occupancy costs as a percentage
of total revenues for the third quarter were comparable with prior
year levels. Cost of goods and services sold, buying and occupancy
costs as a percentage of total revenues for the first nine months decreased
(64.8% versus 66.9%) as compared with the same period last year. Cost
of goods and services sold as a percentage of total revenues for the
first nine months decreased (48.0% versus 51.4%) due primarily to the
Company's achievement of higher gross margins on merchandise sales
during the first six months of the current fiscal year. Buying costs
as a percentage of total revenues for the third quarter and first nine
months were comparable with prior year levels. Occupancy costs as
a percentage of total revenues for the third quarter and first nine
months increased (11.9% versus 11.3% and 13.8% versus 12.9%) due primarily
to the impact of fixed rental costs as measured against the overall
decrease in sales.
Total selling and general expenses decreased $757,000 (8.1%) and $1,609,000
(7.5%) for the third quarter and first nine months, respectively, as
compared to the prior year periods. Payroll and related fringe benefits
decreased $33,000 (0.7%) and $651,000 (5.0%) for the third quarter
and first nine months, respectively, due primarily to costs associated
with locations closed during
- 8 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations, continued
and subsequent to the first quarter of the prior year and staff reductions
initiated subsequent to the second quarter of the prior year. Advertising
expense decreased $524,000 (18.2%) and $819,000 (17.5%) for the third
quarter and first nine months, respectively.
Interest expense for the third quarter was comparable with prior year
levels. Interest expense for the first nine months increased $78,000
(7.7%) due primarily to higher average short-term borrowings during
the first six months as compared to the same period last year.
The higher pre-tax losses for the third quarter and first nine months
($1,168,000 versus $574,000 and $4,938,000 versus $4,794,000, respectively)
were due to the decline in fur merchandise and women's ready-to-wear
sales.
The income tax credits for the third quarter and first nine months
of the prior year were offset by increases in the Company's valuation
allowance with respect to the future tax benefits of the net operating
losses as a result of the uncertainty of their ultimate realization.
- 9 -
<PAGE>
PART II - OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Part I. Exhibit 4.54
Amendment No. 7 to Loan and Security Agreement between
Registrant and Transamerica Business Credit Corporation.
Exhibit 4.55
Amendment No. 8 to Loan and Security Agreement between
Registrant and Transamerica Business Credit Corporation.
Exhibit 11
Computation of earnings per share.
(b) Reports on Form 8-K -- There were no reports on Form 8-K
filed during the thirteen weeks ended November 30, 1996.
Items other than those listed are omitted because they are not required.
- 10 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
of the undersigned thereunto duly authorized.
EVANS, INC.
DATE: January 10, 1997 PATRICK J. REGAN
PATRICK J. REGAN
President and
Chief Executive Officer
DATE: January 10, 1997 WILLIAM E. KOZIEL
WILLIAM E. KOZIEL
Vice President and
Chief Financial Officer
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<PAGE>
EVANS, INC. AND SUBSIDIARIES
Exhibit Page Nos.
4.54 13 - 15
4.55 16 - 18
11 19
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<PAGE>
AMENDMENT NO. 7 TO LOAN AND SECURITY AGREEMENT
AMENDMENT NO. 7, dated as of November 25, 1996, between TRANSAMERICA
BUSINESS CREDIT CORPORATION ("Lender"), and EVANS, INC. ("Borrower"),
and Borrower's wholly-owned Subsidiaries, KOSLOW'S, INC. ("Koslow")
and EVANS - ROSENDORF OF MARYLAND, INC. ("Rosendorf") (Koslow and Rosendorf
individually, a "Borrowing Subsidiary", and collectively, "Borrowing
Subsidiaries").
Lender and Borrower and Borrowing Subsidiaries are parties to a Loan
and Security Agreement dated as of May 31, 1995, as amended by Amendment
No. 1 to Loan and Security Agreement dated as of October 3, 1995, by
Amendment No. 2 to Loan and Security Agreement dated as of November
20, 1995, by Amendment No. 3 to Loan and Security Agreement dated as
of January 5, 1996, by Amendment No. 4 to Loan and Security Agreement
dated as of May 30, 1996, by Amendment No. 5 to Loan and Security Agreement
dated as of July 5, 1996, and by Amendment No. 6 to Loan and Security
Agreement dated as of October 11, 1996 (the "Loan and Security Agreement").
Lender, Borrower and Borrowing Subsidiaries desire to amend the Loan
and Security Agreement in certain respects and, accordingly, the parties
hereto agree as follows:
1. Definitions. Except as otherwise provided herein, the terms defined
in the Loan and Security Agreement are used herein as defined therein.
2. Amendment. Effective as of November 25, 1996, the definition of
"Borrowing Base" in Section 3.1 of the Loan and Security Agreement
is amended and restated as follows:
The "Borrowing Base" shall mean, at any particular time, an amount
equal to the lesser of the Maximum Revolving Loan, or the sum of the
following:
(i) Seventy-five percent (75%) (an "Advance Rate") of Eligible Owned
Store Sales Accounts; plus
(ii) Eighty percent (80%) (an "Advance Rate") of Eligible Licensed
Department Sales Accounts; plus
(iii) Fifty percent (50%) (an "Advance Rate") of Eligible Owned Store
Service Accounts and Eligible Licensed Department Service Accounts;
plus
(iv) The lesser of (x) Twelve Million Dollars ($12,000,000) during
the months of January, February, March and April, and Thirteen Million
Dollars ($13,000,000) during the months of May, June, July, August,
September, October, November and December, except Sixteen Million Dollars
($16,000,000) during the period beginning on November 25, 1996, and
ending on the earlier of January 3, 1997, or the date on which Borrower
sells its leasehold estate in the Real Property commonly described
as 36 South State Street, Chicago, Illinois, or (y) the sum of the
following:
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<PAGE>
(A) Thirty-five percent (35%) (an "Advance Rate") of Eligible Apparel
Inventory during the months of January, February, March and April,
and forty percent (40%) (an "Advance Rate") of Eligible Apparel Inventory
during the months of May, June, July, August, September, October, November
and December; plus
(B) Fifty-five percent (55%) (an "Advance Rate") of Eligible Fur
Inventory during the months of January, February, March and April,
and sixty percent (60%) (an "Advance Rate") of Eligible Fur Inventory
during the months of May, June, July, August, September, October, November
and December.
3. Representation and Warranty. Borrower and each Borrowing Subsidiary
represents and warrants to Lender that the execution and delivery by
Borrower and each Borrowing Subsidiary of this Amendment No. 7 are
within Borrower's and each Borrowing Subsidiary's corporate power,
have been duly authorized by all necessary or proper corporate action,
are not in contravention of any provision of Borrower's or either Borrowing
Subsidiary's Articles or Certificate of Incorporation or By-Laws, will
not violate any law or regulation, or any order or decree of any court
or governmental instrumentality, will not conflict with or result in
the breach or termination of, constitute a default under, or accelerate
any performance required by, any indenture, mortgage, deed of trust,
lease, agreement or other instrument to which Borrower or either Borrowing
Subsidiary is a party or by which Borrower or either Borrowing Subsidiary
or any of its property is bound and do not require the consent or approval
of any governmental body, agency, authority or any other person.
4. Miscellaneous. Except as herein provided, the Loan and Security
Agreement shall remain unchanged and in full force and effect. This
Amendment No. 7 may be executed in any number of separate counterparts,
each of which shall, collectively and separately, constitute one agreement.
This Amendment No. 7 and the obligations arising hereunder shall be
governed by, and construed and enforced in accordance with, the laws
of the State of Illinois applicable to contracts made and performed
in such state, without regard to the principles thereof regarding conflict
of laws, and any applicable laws of the United States of America.
IN WITNESS WHEREOF, this Amendment No. 7 has been duly executed as
of the day and year specified at the beginning hereof.
TRANSAMERICA BUSINESS CREDIT EVANS, INC.
CORPORATION
By: MATTHEW N. MCALPINE By: WILLIAM E. KOZIEL
Name: MATTHEW N. MCALPINE Name: WILLIAM E. KOZIEL
Title: Senior Account Executive Title: Vice President and
Chief Financial Officer
(Signatures continued on next page)
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<PAGE>
KOSLOW'S, INC.
By: WILLIAM E. KOZIEL
Name: WILLIAM E. KOZIEL
Title: Vice President and
Chief Financial Officer
EVANS - ROSENDORF OF
MARYLAND, INC.
By: WILLIAM E. KOZIEL
Name: WILLIAM E. KOZIEL
Title: Vice President and
Chief Financial Officer
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<PAGE>
AMENDMENT NO. 8 TO LOAN AND SECURITY AGREEMENT
AMENDMENT NO. 8, dated as of January 9, 1997, between TRANSAMERICA
BUSINESS CREDIT CORPORATION ("Lender"), and EVANS, INC. ("Borrower"),
and Borrower's wholly-owned Subsidiaries, KOSLOW'S, INC. ("Koslow")
and EVANS - ROSENDORF OF MARYLAND, INC. ("Rosendorf") (Koslow and Rosendorf
individually, a "Borrowing Subsidiary", and collectively, "Borrowing
Subsidiaries").
Lender and Borrower and Borrowing Subsidiaries are parties to a Loan
and Security Agreement dated as of May 31, 1995, as amended by Amendment
No. 1 to Loan and Security Agreement dated as of October 3, 1995, by
Amendment No. 2 to Loan and Security Agreement dated as of November
20, 1995, by Amendment No. 3 to Loan and Security Agreement dated as
of January 5, 1996, by Amendment No. 4 to Loan and Security Agreement
dated as of May 30, 1996, by Amendment No. 5 to Loan and Security Agreement
dated as of July 5, 1996, by Amendment No. 6 to Loan and Security Agreement
dated as of October 11, 1996, and by Amendment No. 7 to Loan and Security
Agreement dated as of November 25, 1996 (the "Loan and Security Agreement").
Lender, Borrower and Borrowing Subsidiaries desire to amend the Loan
and Security Agreement in certain respects and, accordingly, the parties
hereto agree as follows:
1. Definitions. Except as otherwise provided herein, the terms defined
in the Loan and Security Agreement are used herein as defined therein.
2. Amendment. Effective as of November 30, 1996, Sections 7.3(A),
(B), (E) and (H), and the definition of "Fixed Charges" in Section
7.3, of the Loan and Security Agreement, are amended and restated as
follows:
(A) Operating Losses (i) for the first Fiscal Quarter of each of the
1997 and 1998 Fiscal Years of not more than $925,000, (ii) for the
first and second Fiscal Quarters of each of the 1997 and 1998 Fiscal
Years of not more than $3,025,000, and (iii) for the third Fiscal Quarter
of the 1997 Fiscal Year of not more than $200,000.
(B) A Fixed Charge Coverage Ratio equal to or greater than (i) 0.38
to 1.0 for the third Fiscal Quarter of the 1996 Fiscal Year, and (ii)
1.6 to 1.0 for the third Fiscal Quarter of the 1998 Fiscal Year.
(E) Average Inventory Days (i) at the end of the second Fiscal Quarter
of the 1997 Fiscal Year, of not more than 420, (ii) at the end of the
third Fiscal Quarter of the 1997 Fiscal Year, of not more than 230,
and (iii) at the end of each Fiscal Quarter, commencing with the fourth
Fiscal Quarter of the 1997 Fiscal Year, not more than the number set
opposite such Fiscal Quarter in the following schedule:
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<PAGE>
Fiscal Quarter Average Inventory Days
First 300
Second 375
Third 200
Fourth 125
(H) At the end of each Fiscal Quarter, Average Accounts Payable Days
of not more than the number set opposite such Fiscal Quarter in the
following schedule:
Average Accounts
Fiscal Quarter Payable Days
First 90
Second 110
Third - 1996 and 1998 120
Fiscal Year
Third - 1997 Fiscal Year 130
Fourth 85
Fixed Charges: for any period, the sum of (a) interest expense for
such period, (b) scheduled principal payments on long-term debt for
such period, including the scheduled monthly principal payments on
Term Loan A, but not the principal payments on Term Loan A based on
Excess Cash Flow and not the principal payment on Term Loan B, and
(c) the capitalized amount of obligations under capital leases due
and payable for such period, determined in accordance with GAAP.
3. Representation and Warranty. Borrower and each Borrowing Subsidiary
represents and warrants to Lender that the execution and delivery by
Borrower and each Borrowing Subsidiary of this Amendment No. 8 are
within Borrower's and each Borrowing Subsidiary's corporate power,
have been duly authorized by all necessary or proper corporate action,
are not in contravention of any provision of Borrower's or either Borrowing
Subsidiary's Articles or Certificate of Incorporation or By-Laws, will
not violate any law or regulation, or any order or decree of any court
or governmental instrumentality, will not conflict with or result in
the breach or termination of, constitute a default under, or accelerate
any performance required by, any indenture, mortgage, deed of trust,
lease, agreement or other instrument to which Borrower or either Borrowing
Subsidiary is a party or by which Borrower or either Borrowing Subsidiary
or any of its property is bound and do not require the consent or approval
of any governmental body, agency, authority or any other person.
- 17 -
<PAGE>
4. Miscellaneous. Except as herein provided, the Loan and Security
Agreement shall remain unchanged and in full force and effect. This
Amendment No. 8 may be executed in any number of separate counterparts,
each of which shall, collectively and separately, constitute one agreement.
This Amendment No. 8 and the obligations arising hereunder shall be
governed by, and construed and enforced in accordance with, the laws
of the State of Illinois applicable to contracts made and performed
in such state, without regard to the principles thereof regarding conflict
of laws, and any applicable laws of the United States of America.
IN WITNESS WHEREOF, this Amendment No. 8 has been duly executed as
of the day and year specified at the beginning hereof.
TRANSAMERICA BUSINESS CREDIT EVANS, INC.
CORPORATION
By: MATTHEW N. MCALPINE By: WILLIAM E. KOZIEL
Name: MATTHEW N. MCALPINE Name: WILLIAM E. KOZIEL
Title: Senior Account Executive Title: Vice President and
Chief Financial Officer
KOSLOW'S, INC.
By: WILLIAM E. KOZIEL
Name: WILLIAM E. KOZIEL
Title: Vice President and
Chief Financial Officer
EVANS - ROSENDORF OF
MARYLAND, INC.
By: WILLIAM E. KOZIEL
Name: WILLIAM E. KOZIEL
Title: Vice President and
Chief Financial Officer
- 18 -
<PAGE>
<TABLE>
EXHIBIT 11
EVANS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
-------------------------- --------------------------
Nov. 30, Nov. 25, Nov. 30, Nov. 25,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Primary:
--------
Weighted average
shares outstanding 4,918,301 4,918,301 4,918,301 4,918,301
Incremental shares
for exercise of
stock options 118,419 -- 63,390 --
------------ ------------ ------------ ------------
Adjusted number of
common shares
outstanding 5,036,720 4,918,301 4,981,691 4,918,301
============ ============ ============ ============
Net loss ($677,000) ($574,000) ($2,864,000) ($4,794,000)
============ ============ ============ ============
Net loss per share ($0.13) ($0.12) ($0.57) ($0.97)
======= ======= ======= =======
Fully diluted:
--------------
Weighted average
shares outstanding 4,918,301 4,918,301 4,918,301 4,918,301
Incremental shares
for exercise of
stock options 118,419 -- 72,567 --
------------ ------------ ------------ ------------
Adjusted number of
common shares
outstanding 5,036,720 4,918,301 4,990,868 4,918,301
============ ============ ============ ============
Net loss ($677,000) ($574,000) ($2,864,000) ($4,794,000)
============ ============ ============ ============
Net loss per share ($0.13) ($0.12) ($0.57) ($0.97)
======= ======= ======= =======
- 19 -
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Mar-01-1997
<PERIOD-START> Mar-03-1996
<PERIOD-END> Nov-30-1996
<CASH> 2,768,000
<SECURITIES> 0
<RECEIVABLES> 14,753,000
<ALLOWANCES> 0
<INVENTORY> 31,311,000
<CURRENT-ASSETS> 51,504,000
<PP&E> 20,612,000
<DEPRECIATION> 10,681,000
<TOTAL-ASSETS> 64,714,000
<CURRENT-LIABILITIES> 44,267,000
<BONDS> 0
0
0
<COMMON> 1,267,000
<OTHER-SE> 17,647,000
<TOTAL-LIABILITY-AND-EQUITY> 64,714,000
<SALES> 35,358,000
<TOTAL-REVENUES> 46,108,000
<CGS> 22,136,000
<TOTAL-COSTS> 29,874,000
<OTHER-EXPENSES> (5,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,094,000
<INCOME-PRETAX> (4,938,000)
<INCOME-TAX> 2,074,000
<INCOME-CONTINUING> (2,864,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,864,000)
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
</TABLE>
